New builds and negative gearing policy changes
A key design feature of the legislated negative gearing changes is that new residential properties — new builds — continue to qualify for negative gearing even after the rules change for established properties from 1 July 2027. This is seen as a way to encourage housing construction while reducing speculative demand for existing stock.
How new builds are expected to be treated
Under reported proposals:
- Established (existing) residential properties purchased after the commencement date may no longer generate negative gearing losses that can offset other income
- New residential properties (newly constructed dwellings) are expected to retain access to negative gearing under current rules
Additional tax advantages of new builds
Beyond the negative gearing question, new builds already offer superior depreciation:
- Full Division 43 capital works (2.5% on the full construction cost)
- Full Division 40 plant and equipment (no second-hand asset restriction)
- Often higher overall depreciation deductions than established properties of the same value
The downsides of new builds
Tax benefits should not override fundamental investment considerations:
- New builds sometimes carry a premium over established property for comparable locations
- Some new developments — especially high-density apartments — have faced issues with oversupply and lower capital growth
- Depreciation benefits diminish over time as the building ages
A balanced view
If you were already considering a new build as a sound investment in a good location, the proposed tax changes make the case stronger. If you are switching from an established property to a new build purely to preserve a tax benefit, make sure the underlying property fundamentals support the decision.
Get professional advice
The interaction of negative gearing rules, CGT changes, and depreciation on new builds is complex. A tax advisor and a quantity surveyor can model the after-tax returns for your specific situation.